JUL^,    191P 


UNIVERSITY  OF  CALIFORNIA 
AT  LOS  ANGELES 


Interim  Report  of  the  h^uropean 
Commission  of  the  National 
Industrial  Conference  Board 


National  Industrial  Conference  Board 

July,  1919 


National  Industrial  Conference  Board 

15  BEACON  STREET,  BOSTON,  MASS. 


BRANCH  OFFICE 
724  SOUTHERN  BUILDING,    WASHINGTON,    D.  C. 


THE  National  Industrial  Conference  Board  is  a  co-operative 
body  composed  of  representatives  of  national  and  state  in- 
dustrial associations,  and  closely  allied  engineering  societies  of  a 
national  character,  and  is  organized  to  provide  a  clearing  house 
of  information,  a  forum  for  constructive  discussion,  and  ma- 
chinery for  co-operative  action  on  matters  that  vitally  affect 
the  industrial  development  of  the  nation. 

Frederick  P.  Fish Chairman 

Frederic  C.  Hood Treasurer 

Magnus  W.  Alexander     .        .  Managing  Director 


MEMBERSHIP 

American  Cotton  Manufacturers'  Association 

American  Hardware  Manufacturers'  Association 

American  Paper  and  Pulp  Association 

American  Society  of  Mechanical  Engineers 

Electrical  Manufacturers'  Club 

Manufacturing  Chemists'  Association  of  the  U.  S. 

National  Association  of  Cotton  Manufacturers 

National  Association  of  Manufacturers 

National  Association  of  Wool  Manufacturers 

National  Automobile  Chamber  of  Commerce 

National  Boot  and  Shoe  Manufacturers'  Association 

National  Council  for  Industrial  Defense 

National  Electric  Light  Assocation 

National  Erectors'  Association 

National  Founders'  Association 

National  Metal  Trades  Association 

Rubber  Association  of  America,  Inc. 

Silk  Association  of  America 

The  Railway  Car  Manufacturers'  Association 

United  Typothet^  of  America 

ASSOCIATE  MEMBERSHIP 

Associated  Industries  of  Massachusetts 
Associated  Manufacturers  and  Merchants 

OF  New  York  State 
Illinois  Manufacturers'  Association 


INTERIM     Rr:PORT 
OF    THK    KUROPl'AN    COMMISSION 

OI'    TIIK 

NATIONAL    INDUSTRIAL 

CONFKRliNOK    BOARD 


July,  1919 


»  .        ■         > 

-       .        »       I  H  •   J  '  > 

•  ;«•••     '     * 


Copyright  1919 


National  Industrial  Conference  Board 

IS    Beacon     Street 
Boston,  Mass. 


Foreword 

The  European  Commission  herewith  presents,  in 
advance  of  its  complete  report,  some  general  con- 
clusions which  it  hopes  may  be  of  value  at  this  time 
when  industrial  questions,  and  especially  the  relations 
of  employers  and  employees,  occupy  the  front  of  the 
stage.  In  this  Interim  Report  it  is  not  possible  to  give 
the  body  of  facts  on  which  the  Commission  has  based 
its  opinions.  At  the  best  it  is  only  possible  to  state 
briefly  the  general  situation.  Those  who  wish  to 
acquaint  themselves  more  fully  with  the  facts  should 
consult  the  complete  report,  which  it  is  hoped  may  be 
issued  at  an  early  date. 

It  is  to  be  understood  that  the  Conference  Board  prints 
this  Report,  not  as  an  expression  of  its  official  position, 
but  as  that  of  the  members  of  the  Commission  herewith 
appended. 

Charles  W.  Asbury,  ChaiTinan, 

Vice-President  and  Treasurer,  The  Enterprise  Manufacturing 
Company  of  Pennsylvania, 
Philadelphia,  Pennsylvania. 

William  H.  Van  Dervoort, 

President,  Root  &  Van  Dervoort  Engineering  Company, 
East  Moline,  Illinois. 

S.  Pemberton  Hutchinson, 

President,  The  Westmoreland  Coal  Company, 
Philadelphia,  Pennsylvania. 

Oliver  S.  Lyford, 

Vice-President,  Finance  &  Trading  Corporation, 
New  York  City,  New  York. 

LoYALL  A.  Osborne, 

Vice-Pres.,  Westinghouse   Electric  &  Manufacturing  Company, 

New  York  City,  New  York. 


in 


1 8660.' i 


Interim  Report  of  the  European 

Commission  of  the 

National  Industrial  Conference  Board 


CHAPTER  I 
INTRODUCTION 


The  upheaval  caused  by  the  European  War  has  not 
only  produced  a  disturbance  in  normal  conditions  of 
industry,  commerce  and  finance,  but  it  has  raised  very 
difficult  questions  as  to  the  means  by  which  reconstruc- 
tion may  be  accomplished.  A  knowledge  of  how  the  r^y^e 
processes  of  readjustment  are  going  on  in  Europe  is  European 
of  vital  interest  to  Americans,  The  European  Com-  War 
mission  of  the  National  Industrial  Conference  Board 
was  concerned  in  its  investigations  chiefly  with  the 
problems  arising  from  the  relations  between  employers 
and  employees.  In  its  conclusions,  arrived  at  from  an 
examination  of  two  or  three  months,  obviously  no  ex- 
haustive statements  can  be  made  on  many  matters, 
each  of  which  would  require  much  time  and  space  for 
their  full  treatment.  Yet  some  results  of  a  practical 
kind  have  been  reached  which  it  is  hoped  may  be  of 
value  to  the  industrialists  of  the  United  States. 

Your  Commission  sailed  March  1,  1919,  and  re- 
turned May  18,  1919.  In  general,  it  was  attempted  to 
get  the  point  of  view  of  government  officials,  of  labor 
leaders  and  of  employers.  About  April  1st,  after 
visits  to  establishments  in  the  Midlands,  North  of 
England,  Scotland  and  Wales,  the  Commission  went  yl^ued 
to  the  Continent,  studying  conditions  in  France, 
Belgium  and  Italy.  The  industries  in  the  neighborhood 
of  Paris,  Lille,  Douai,  Lyons  and  Saint-Etienne,  as 
well  as  those  in  Genoa,  Milan  and  Turin,  were  visited. 
In  each  country  high  officials  and  executive  managers 
seemed  ready  to  furnish  all  information  available  and 
no  difficulty  arose  in  seeing  industrial  works  of  all 
kinds. 


"Upheaval 
4)f  War 


New 
Conditions 


In  all  the  countries  visited  it  was  evident  that  the 
economic  life  of  the  people  had  been  greatly  disturbed 
by  the  war.  Laborers  had  been  withdrawn  from  in- 
dustry to  a  much  greater  extent  than  in  America; 
new  laborers,  women,  those  formerly  unemployed, 
and  foreigners,  had  been  introduced  to  fill  urgent 
needs;  the  working  of  demand  and  supply  in  all  direc- 
tions had  been  interfered  with;  new  machinery  and 
processes  has  been  devised  to  aid  unskilled  labor;  in 
many  instances  labor  organizations  for  patriotic  rea- 
sons had  given  up  old  restrictions  on  output;  pro- 
duction was  shifted  to  the  making  of  munitions  and 
articles  needed  for  war;  great  changes  in  industrial 
organization  resulted;  Governmental  control  of  in- 
dustry on  a  vast  scale  was  inevitable;  control  by 
Government  Boards  and  price-fixing  of  most  needed 
articles  followed;  many  new  factories  were  built  for 
war  production,  and  private  concerns  became  "con- 
trolled"; shipping  was  taken  over  by  the  State;  and 
foreign  trade,  exports  and  imports,  acquisition  of  food 
and  raw  materials,  especially  of  coal,  became  entirely 
deranged.  These  and  other  considerations  caused  a 
mighty  upheaval  in  industry. 

The  process  of  reconstruction  needs  time  and  wisdom. 
The  long  strain  of  war  and  of  prolonged  physical  exer- 
tion in  the  shops  and  offices  has  led  to  an  inevitable 
nervous  reaction.  Irritation  now  develops  on  slight 
provocation.  To  this  have  been  added  difficult  econo- 
mic inliuences,  chief  of  which  has  been  the  rise  in  cost  of 
living  to  over  100  per  cent  of  pre-war  prices.  While 
members  of  different  social  classes  have  come  to  value 
one  another  more  highly  through  common  service  in  the 
trenches,  yet  old  social  conventions  have  been  chal- 
lenged anew.  The  laboring  classes  have  won  new 
prestige  by  valiant  conduct  in  the  war,  and  their  or- 
ganizations have  greatly  increased  in  membership. 
Then,  too,  it  was  to  be  expected  that  political  parties 
should  manceuver  to  secure  leadership  over  an  electorate 
stirred  by  new  Issues.  In  all  these  countries  political 
forces  have  played  a  very  large  part  in  the  questions  of 
labor  and  industry. 

The  Governments  were  forced  by  the  exigencies  of 
war  to  deal  with  large  groups  rather  than  with  in- 
dividuals; thus  organization  among  both  workers  and 
employers  was  stimulated.    Organized  labor,  especially 

2 


in  Great  Britain,  has  come  out  of  the  war  greatly  im- 
pressed by  its  increased  political  and  industrial  power. 
A  closer  co-operation  between  all  the  factors  of  pro- 
duction was  necessitated  by  a  common  danger  during 
the  war.  This  was  an  element  of  strength  which  in 
some  cases  will  continue,  but  which  cannot  now  be 
definitely  counted  upon.  Indeed,  the  rising  tide  of 
discontent  among  the  laboring  classes  has  been  aided  no 
doubt  by  an  international  propaganda  springing  from 
extreme  elements  of  disorder.  New  and  often  extreme 
demands  are  being  made  for  nationalization  of  leading 
industries  and  for  a  larger  share  of  control.  With 
industry  crippled  by  the  war,  these  demands  have 
obviously  aggravated  what  must  in  any  event  have 
been,  after  so  great  a  disturbance,  a  very  difficult 
situation. 

Moreover,  the  huge  war  debts  and  the  publx  cred't 
of  European  countries  touch  intimately  all  industrial 
conditions.  Industry  and  employment  of  labor  cannot 
begin  effectually  unless  machinery,  equipment,  re- 
building, and  raw  materials  can  be  paid  for.  Indeed 
matters  of  public  credit  seem  to  lie  at  the  very  basis  of 
early  reconstruction  and  the  restoration  of  normal 
labor  conditions. 


Discontent 


War  DebtB 


CHAPTER  II 


Relative 
Costs  in 
America  and 
Great  Britain 


Dependence 
of  the 

Producer  on 
Efficiency 


EFFICIENCY  OF  PRODUCTION 

Early  in  our  investigations  the  question  of  efficiency 
of  production  presented  itself.  Everywhere,  especially 
in  Great  Britain,  there  was  expressed  a  fear  of  American 
competition  based  on  the  belief  that  the  war  had  greatly 
increased  the  burdens  on  European  industry  from  which 
our  country  was  largely  free.  But  even  before  the  war 
our  superiority  in  relative  costs  had  become  apparent. 
As  an  instance:  one  large  English  automobile  firm  made 
an  offer  to  an  American  manufacturer  of  four-cylinder 
engines  to  buy  at  the  best  American  dealer's  price, 
paying  transportation  to  England,  a  thirty-five  per  cent 
import  duty,  and  yet  expected  to  sell  his  car  in  com- 
petition with  English-made  cars  of  the  same  quality. 
This  relative  disadvantage  seems  to  be  mainly  due  to 
inferior  manufacturing  methods  and  organization. 
Moreover,  English  freight  rates  are  high;  it  costs  as 
much  to  send  a  machine  tool  by  railway  freight  from 
Glasgow  to  London  as  from  New  York  to  London. 
Although  America  owes  much  to  large  scale  production, 
good  manufacturing  methods  and  superior  factory 
organization,  such  conditions,  of  course,  do  not  obtain 
in  all  industries  to  the  advantage  of  her  producers. 
On  these  matters,  however,  it  is  of  first  importance  to 
American  producers  that  they  get  all  available  know- 
ledge regarding  the  efficiency  of  production  in  other 
countries. 

Each  manufacturer  is  concerned  directly  with  the 
relation  of  his  outlay  to  his  production.  In  all  com- 
petitive industries  this  margin  of  difference  between 
outlay  and  product  is  vital  to  continuance  in  industry. 
Given  a  rising  total  cost  —  whether  due  to  increasing 
prices  of  materials,  labor,  taxes,  or  what  not  —  his 
own  possibility  of  continuing  in  production  lies  in 
his  ability  to  enlarge  his  output  (that  is,  to  increase 
the  number  of  units  of  goods  produced  by  a  given 
quantum  of  labor  and  capital);  or  to  raise  the  selling 
price  to  the  consumer  of  each  unit  of  product.  In  the 
latter  case,  the  purchaser  (in  other  words,  the  public) 


should  have  something  to  say.  If,  therefore,  producers  in 
other  countries  should  become  as  efficient  as  American 
producers,  and  if  prices  are  limited  by  conditions  in 
international  markets,  as  they  surely  must  be,  Ameri- 
can manufacturers  paying  the  higher  labor  rates  would 
be  forced  out  of  the  competitive  field. 

Schemes  for  the  stimulation  of  productivity  have 
been  tried  in  the  countries  visited.  With  the  British 
workmen,  the  oflFer  of  a  bonus  or  premium  for  more  or 
better  work  has  not  been  very  popular.  Piecework, 
however,  which  was  quite  general  before  the  war,  has 
been  more  universally  introduced.  It  has  often  given 
the  workers  higher  wages  while  the  management  got 
the  benefit  by  a  spreading  of  the  overhead  charges. 
The  employers  agreed  that  during  the  war  piece  rates 
once  set  should  not  be  reduced;  this  removed  the  objec- 
tion of  the  workers  and  resulted  in  many  cases  in  very 
high  productivity  with  consequent  high  wages.  For 
instance:  women  and  unskilled  workers  on  repetitive 
war  work  came  to  earn  more  than  the  previous  earnings 
of  skilled  men  working  at  day  rates.  Before  the  war 
the  objection  to  piecework  by  the  workers  was  that, 
when  earnings  rose,  the  manager  lowered  the  rate; 
consequently,  the  interest  of  the  worker  in  enlarging 
productivity  was  removed  on  the  ground  that  all  the 
benefits  of  increased  production  inevitably  went  to 
the  employer. 

In  Great  Britain,  having  a  surplus  of  labor,  a  system  of 
restricting  output  had  grown  up  previous  to  the  war. 
It  was  generally  understood  that  "ca'canny"  methods 
were  in  existence  in  many  British  industries.  It  was 
often  stated  that  the  policy  of  the  employers  in  re- 
ducing the  piecework  rate  when  wages  rose  to  a  high 
level  was  the  reason  why  some  unions  in  self-defense 
adopted  the  principle  of  restriction  of  output.  In  the 
relative  order  of  their  importance,  the  leading  reasons 
for  restriction  of  output  by  British  trade  unions  are 
the  following:  fear  of  rate-cutting  by  the  employer, 
dread  of  unemployment,  the  desire  to  protect  inferior 
workers,  the  wish  to  safeguard  health,  and  the  natural 
human  disinclination  to  work  too  hard.  In  regard  to 
restriction  of  output  in  connection  with  the  war,  certain 
unexpected  results  happened.  Under  the  stimulus  of 
war  conditions,  the  introduction  of  improved  ma- 
chinery and  speeding  up  of  operations,  it  became  clear 

5 


Piecework 


Restriction 
on  Output 


The  Network 

of 

Restrictions 


Restoration 

of 

Restrictions 


to  every  one  that  labor  effort  before  the  war  had  not 
been  at  its  highest  efficiency. 

In  the  period  before  the  war  the  unions  had  estab- 
lished a  complex  system  of  restrictions  on  output. 
This  affected  the  standard  rates  of  wages,  length  of 
the  working-day,  overtime,  night  work,  Sunday  duty, 
mealtimes,  and  holidays;  also  the  exact  classes  of 
operatives  (unskilled  laborers,  women,  apprentices)  to 
be  engaged  on  various  kinds  of  work  on  particular  pro- 
cesses with  different  kinds  of  machines;  the  employ- 
ment of  unionists;  the  processes  or  machines  to  be  used 
for  particular  tasks;  the  speed  at  which  machines 
should  be  worked;  the  employment  of  boys  or  girls,  if 
employed  at  all,  or  in  what  processes;  fixing  of  piece 
rates  and  allowances;  and  the  amount  of  output  by 
each  operative  that  should  be  considered  a  fair  day's 
work.  It  has  been  generally  supposed  that  all  of  these 
restrictions  were  removed  during  the  first  year  of  the 
war  at  the  request  of  the  Government.  In  actual  fact 
by  no  means  all  of  these  restrictions  were  given  up. 
Those  which  were  removed  other  than  those  affecting 
hours  and  wages,  concerned  chiefly  the  employment  of 
women  and  unskilled  persons  in  munitions  works. 
The  undeniable  increase  of  production  during  the  war, 
it  is  clear,  cannot  be  due  solely  to  the  withdrawal  of  the 
union  restrictions.  In  addition,  there  was  an  introduction 
of  new  and  effective  elements  of  management,  such  as 
large  scale  production,  standardization  of  operation?,  and 
the  bringing  in  of  new  machinery  by  which  repetitive 
processes  could  be  carried  on  by  hitherto  unskilled 
persons.  Consequently  a  sweeping  transformation 
occurred  in  the  organization  of  British  industry.  New 
processes  and  new  classes  of  labor  were  introduced. 

Although  the  Government  had  made  a  promise  that 
the  restrictions  should  be  restored  after  the  war,  it  was 
discovered  that  the  organic  changes  in  industry  had 
been  such  that  it  would  be  impossible  now  to  go  back 
to  pre-war  conditions.  It  has  been  realized  by  such 
authorities  as  Sidney  Webb  that  restoration  cannot  be 
carried  out;  therefore  the  present  situation  is  colored 
by  this  impossibility  and  by  the  fact  that  the  labor 
union  leaders  regard  this  situation  as  a  reason  why 
they  should  be  given  equivalent  advantages  in  some 
other  directions.  If  they  yield  their  demands  for  the 
restoration  of  restrictions,  as  they  must,  they  will  use 

6 


their  position  in  bargaining  to  make  a  demand  for  other 
things.  In  fact,  they  are  actually  demanding  in  ex- 
change an  extended  programme  of  reform,  aiming 
ultimately  at  nationalization  and  the  control  of  industry 
by  organized  labor. 

An  illustration  of  reduced  efficiency  of  production  is 
found  in  the  coal  industry,  which  is,  of  course,  one  of 
primary    importance    not   only    to   Great    Britain    but 
to    all    her   competitors.     The   ability   of   the    British 
to  produce  coal  cheaply  and  to  employ  it  in  the  working 
up  of  raw  material  has  been  essential  to  the  mainte-     y^e  (^^1 
nance  of  her  foreign   trade.     Since  coal  is  an   indis-     industry 
pensable  necessity  for  all  classes  of  the  community, 
the    coal-mining    industry    could    exercise    a    powerful 
influence   in   bringing   industry   to   a   standstill.     The 
expense   of   production   of   coal    has    risen    to   such    a 
point    that    America    can    successfully   compete    with 
her  in  selling  coal  in  many  foreign  markets.     Cheap 
British  coal  seems  to  have  gone  forever.     One  reason 
evidently  is  the  decreasing  efficiency  of  the  miners  to- 
gether with   a  demand  for  higher  wages  and   shorter 
hours  of  work.     Fully  95  per  cent  of  the  miners  have 
organized  in  unions.     They  have  been  aggressive  and 
unwilling  to  compromise.     In  March,  1915,  they  re- 
fused to"  sign  the  Treasury  Agreement  and  were  un- 
willing to  surrender  the   right  to  strike.     When   the 
Government  was  compelled  to  place  them  under  the 
provisions  of  the  Munitions  Act,  in  July,  1915,  they  did 
not  acquiesce.     In  December,   191G,  under  authority 
of  the  Defense  of  the  Realm  Act,  the  Government  took 
control  of  the   mines,  at  the   same  time  conceding  a. 
substantial  increase  in  wages.     As  to  housing  condi- 
tions, our  examination  in  VVales  showed  that  they  were 
not   as   bad    as   commonly   represented.     The   miners 
receive  wages  enough  to  live  in  comfortable  houses,  but 
were  often  content  with  old  and  poor  quarters. 

In  February,   1919,  they  demanded  an  increase  in 
wages  of  30  per  cent  and  a  reduction  in  working  hours  of 
25  per  cent,  together  with  the  acceptance  of  the  principle 
of  the  ultimate  nationalization  of  the  Industry.     The     ^^^4^^^,^ 
Government    appointed    a    Coal    Commission    whose     ^f  the 
report   was    named    from    its    chairman,    the    Sankey     Miners 
Report.     The   Government   adopted    and    the   miners 
ultimately  accepted  this  report,  which  recommended  not 
only  an  Increase  of  2s.  per  day  worked  and  a  reduction, 

7 


Rise  in 
Price  of 
Coal 


United  States 
Increasing  its 
Exports  of 
Coal 


beginning  July  16,  1919,  of  the  hours  of  labor  from  8  to 
7,  but  "subject  to  tha  economic  position  of  the  industry 
at  the  end  of  1920,"  the  hours  of  labor  per  day  were 
to  be  reduced  to  6  hours  at  and  from  July  13,  1921. 
In  June,  1919,  after  considering  the  question  of  nation- 
alization, the  Coal  Commission,  in  the  main  report, 
signed  by  Justice  Sankey,  recommended  immediate 
legislation  for  the  acquisition  of  the  mines  by  the  State. 
It  is  now  a  question  whether  Lloyd-George's  coalition 
government  and  the  people  will  accept  the  policy  of 
nationalization  thus  proposed.  ^ 

Along  with  this  industrial  disturbance  in  the  coal 
industry  has  gone  a  serious  reduction  in  the  output  of 
the  mines  and  a  rise  in  the  price  of  coal  both  for  export 
and  for  domestic  consumption.  Before  the  war  the 
average  annual  output  for  the  coal  mines  was  about  270 
million  tons.  In  June,  1919,  Sir  Auckland  Geddes  in- 
formed the  House  of  Commons  that  the  annual  produc- 
tion from  July,  1919,  could  not  be  more  than  about  217 
million  tons;  and  he  warned  the  public  of  the  coming 
scarcity  and  high  prices  of  coal.  Already  coal  had  in- 
creased in  price.  Sir  Richard  Redmayne,  Chief  Inspector 
of  Mines,  showed  that  the  wage  cost  per  ton  at  the  pit 
mouth  had  risen  from  Qs.  4:d.  in  1913  to  15s.  4}/^^. 
in  1918.  The  cost  of  coal  at  the  pit  mouth  had  in- 
creased from  about  IOj.  in  1914  to  24j.  10^.  in  Sep- 
tember, 1918.  The  average  selling  price  in  London 
in  1914  was  25s.  Qd.  a  ton,  while  the  controlled  public 
price  in  1918  was  43j-.  Qd.  and  in  July,  1919,  it  was  in- 
creased by  Qs. 

As  a  consequence,  American  coal  exporters  have 
made  inroads  into  markets  formerly  supplied  by  Great 
Britain.  To  Brazil,  Argentina,  and  Uruguay  shipments 
from  the  United  States  have  increased  from  96,000 
tons  in  1910  to  1,619,000  tons  in  1916;  while  British 
exports  to  these  countries  had  fallen  off  from  6,304,000 
tons  in  1913  to  1,105,000  tons  in  1916.  Of  course  much 
of  this  change  should  be  attributed  to  the  difficulties 
in  obtaining  shipping  and  to  the  obvious  effect  of  the 
war  on  the  distribution  of  coal.     It  remains  true,  how- 

1  Recent  events  in  July,  1919,  show  a  very  serious  situation.  In  Parlia- 
ment a  strong  opposition  to  nationalization  has  arisen.  Thereupon  the 
coal  miners  have  gone  on  a  strike  to  enforce  the  recommendations  of  the 
Sankey  Report.  Sir  Auckland  Geddes  explained  that  the  rise  in  the  price 
of  coal  was  dangerous  to  British  industry;  but,  as  yet,  the  governmental 
officials  have  not  stopped  the  strike. 

8 


ever,  that  the  United  States  has  been  increasing  the 
quantity  of  its  coal  exports  to  Italy,  Sweden,  Spain, 
and  other  countries.  The  explanation  of  this  change  in 
exports  is  partially  due  to  the  fact  that,  in  the  period  up 
to  1912,  the  output  in  tons  per  employee  had  fallen  in 
Great  Britain  from  312  to  244  tons,  but  that  it  had 
risen  in  the  United  States  from  400  to  GGO  tons. 

The  relative  efficiency  of  production  is  directly 
affected  by  the  use  of  mechanical  coal  cutters.  Be- 
tween 1903  and  1917  the  number  of  machines  used  in 
the  United  Kingdom  increased  from  043,  producing  over 
5,000,000  tons  of  coal,  to  3,799  machines,  producing  over 
27,000,000  tons  of  coal;  while  in  the  United  States  in 
the  same  years  the  number  of  machines  increased  from 
6,658,  producing  over  69,000,000  tons  of  coal,  to 
16,197  machines,  producing  over  253,000,000  tons  of 
coal.  In  fact,  in  1912  and  1913  only  8  per  cent  of  Eng- 
lish coal  was  obtained  by  the  use  of  coal-cutting 
machinery  as  contrasted  with  probably  51  per  cent  in 
the  United  States.  It  also  is  clear  that  the  English 
collieries  and  docks  —  certainly  in  Wales  —  are  not 
equipped  with  such  modern  labor-saving  machinery  as 
in  the  United  States.  The  absence  of  modern  devices 
for  saving  of  labor  in  boiler  houses  and  on  the  surface 
generally  is  very  noteworthy.  No  doubt  before  the 
war  labor  was  cheap  and  it  was  more  profitable  to 
employ  labor  than  to  introduce  machinery.  In  some 
parts  of  England,  however,  especially  in  the  Durham 
Field  and  on  the  docks  at  Newcastle  and  South  Shields, 
better  trucks  and  electric  haulage  with  modern  tips  and 
cranes  have  been  introduced.  The  attitude  of  organized 
labor  to  this  introduction  of  machinery  is  not  clear.  In 
the  investigation  of  your  Commission,  it  seemed  plain 
that,  while  open  opposition  might  not  have  existed, 
something  was  always  happening  to  the  machinery  to 
prevent  its  efficient  use.  In  fact  some  definite  an- 
tagonism to  machinery  was  clearly  indicated. 

In  regard  to  the  general  question  of  efficiency  of 
production  it  is  to  be  noted  that  these  conditions  are 
not  confined  to  Great  Britain.  The  United  States 
has  not  escaped  them.  This  statement  is  true  not 
only  of  coal  mining  but  also  of  other  industries.  In 
one  of  our  shipbuilding  yards,  for  instance,  it  was 
found  that  a  certain  steel  ship  had  required  before  the 
war  200,000  hours  of  labor  to  construct  it  at  30  cents 


Labor-Saving 
Devices 


Loss  of 
Efficiency 
in  the 

United  States 
also 


per  hour;  today  a  sister  ship,  in  every  respect  the  same, 
has  just  been  completed,  requiring  400,000  hours  of 
labor,  but  paid  at  70  cents  per  hour.  In  this  case,  there- 
fore, it  appears  that  the  efficiency  of  labor  —  irrespec- 
tive of  materials,  engines,  etc.,  —  has  fallen  in  the  ratio 
of  6  to  28.  A  part  of  this  loss  of  efficiency  was  undoubt- 
edly due  to  lack  of  skill  by  the  new  men  employed  in 
the  industry,  but  much  of  this  loss  must  be  accounted 
for  by  the  deliberate  practices  of  the  workers;  but  too 
much  importance  should  not  be  assigned  to  this  one 
case.  It  is  highly  important,  therefore,  that  our 
industries  should  foresee  the  inevitable  dangers  facing 
us  if  we  do  not  counteract  the  tendency  for  the  wrong 
point  of  view  to  spread  among  our  workmen  — 
the  view  that  more  employment  in  a  country  where 
there  is  a  surplus  of  labor  can  be  obtained  by  lowering 
the  production  of  each  worker.  The  forces  which, 
undirected  or  wrongly  directed,  have  already  brought 
British  industries  to  such  an  impasse^  should  not, 
by  our  careless  passiveness,  be  permitted  to  produce 
the  same  effects  upon  our  own. 


10 


CHAPTER  III 

LABOR  PROBLEMS 

One  general  conclusion  appears  to  be  obvious;  in 
a  country  whose  population  supplies  a  surplus  of 
labor  the  whole  industrial  situation  becomes  thereby 
different  from  that  where  the  labor  supply  is  short.  The  Labor^in  "* 
former  condition  is  exemplified  in  Great  Britain.  France 
In  France,  however,  there  is  no  national  surplus  of 
labor,  and  as  a  consequence  labor  makes  no  opposition 
to  the  introduction  of  labor-saving  machinery.  Not 
only  is  there  no  fear  that  it  will  reduce  employment, 
but  it  is  looked  upon  as  a  means  of  making  the  tasks  of 
labor  less  onerous  and  more  agreeable.  In  addition, 
there  is  a  sympathetic  attitude  toward  scientific 
management.  The  difference  which  the  absence  of  a 
surplus  of  labor  produces  may  partly  account  for  the 
very  interesting  announcement  in  the  Programme  of 
the  General  Federation  of  Labor  {Confederation  Generale 
du  Travail)  headed  by  Leon  Jouhaux: 

"The  formula  for  the  working  class  should  be  —  a 
maximum  production  in  the  minimum  working  time  for  a 
maximum  of  wages. 

"For  the  employer,  —  a  maximum  development  of 
shop  equipment  to  produce  a  maximum  output  with  a  mini- 
mum expense  of  production." 

In  Italy  the  surplus  of  labor  produces  a  situation 
akin  to  that  of  Great  Britain  and  yet  very  different 
from  it.  The  Government  does  not  dare  to  demobilize  Surplus  in 
its  army  while  industry  has  not  yet  resumed  normal  Italy 
activity.  There  is  much  unemployment;  strikes  are 
prevalent  and  radical  leaders  maintain  their  power  by 
threats  and  actual  violence. 

It  was  obvious  that  there  was  a  widespread  discontent 
among  the  workers  in  all  industries  and  in  all  countries. 
Discontent  in  itself  may  not  be  a  sign  of  danger;  on 
the  contrary,  it  may  be  a  healthy  sign  of  progress 
morally  and  materially  towards  a  higher  standard. 
With  such  an  attitude  of  mind  there  must  be  general 

11 


Causes  of 
Discontent 


The 

Moderate 
and  Radical 
Attitudes 
Contrasted 


sympathy.  In  the  present  difficult  conditions  of 
reconstruction,  however,  the  inevitable  discontent  has 
been  magnified  by  a  propaganda  carried  on  by  extreme 
elements  opposed  to  the  proper  conduct  of  orderly 
government.  The  British  Minister  of  Labour,  Sir 
Robert  Home,  explained  that: 

The  industrial  unrest  was  due,  among  many  things, 
mainly  to  the  following  causes:  the  long  strain  of  the  war; 
the  nervous  effect  produced  by  the  extreme  industrial 
efforts  of  the  nation;  the  disturbance  of  normal  economic 
life;  the  rise  in  the  cost  of  living;  and,  in  a  certain  measure, 
an  absorption  into  English  thinking  of  the  revolutionary 
movements  of  Europe. 

The  cause  undoubtedly  having  the  most  practical 
import  is  the  high  cost  of  living,  due  not  only  to  a 
scarcity  produced  by  the  emergencies  of  war,  but  to  the 
high  rates  of  wages  which  have  in  turn  added  to  the 
costs  of  production.  In  Great  Britain,  during  past 
decades,  British  industry  gave  little  or  no  attention  to 
the  drab  and  distressing  conditions  of  life  surrounding 
the  workmen.  While  commercial  supremacy  seemed 
fairly  assured,  little  attention  was  paid  to  what  the  em- 
ployer ought  to  have  done  by  way  of  anticipating  the 
grievances  of  labor.  As  a  consequence  unionism  and 
labor  agitation  have  been  growing  apace.  A  fertile 
soil  in  which  such  an  agitation  could  grow,  existed  even 
before  1914.  After  the  upheaval  of  the  war  the  situa- 
tion naturally  furnished  opportunity  for  the  work  of  the 
extreme  radicals.  Discontent  was  fanned  into  a  move- 
ment urging  a  radical  modification  of  the  existing 
capitalistic  system  and  even  of  the  structure  of  govern- 
ment. Certain  socialistic  elements  propose  to  satisfy 
social  unrest  merely  on  a  materialistic  basis;  that  is,  to 
solve  social  ills  primarily  by  the  offer  of  larger  material 
rewards.  Such  a  policy  does  not  aim  to  supply  the 
moral  and  educational  forces  necessary  to  a  higher 
standard  of  living. 

Two  different  states  of  mind  must  be  recognized  in 
the  labor  world  of  Great  Britain.  On  the  one  hand, 
there  is  the  large  body  of  workers  imbued  with  a 
respect  for  law  and  order,  and  who,  while  endeavoring 
to  improve  their  material  position,  are  not  influenced 
by  radical  appeals  to  violence  or  against  existing 
forms  of  property,  and  who  have  a  respect  for  a  lawful 

12 


government.  On  the  other  hand,  there  has  risen  a 
radical,  even  revolutionary  point  of  view  which 
threatens  not  only  the  peaceful  order  of  society  but 
aims  in  its  extreme  form  at  the  domination  of  the 
industrial  system  and  the  overthrow  of  orderly  govern- 
ment. But  radical  views  have  permeated  all  classes  of 
labor.  All  these  radical  views  aim  at  nationalization  of 
essential  industries,  at  "democratic"  control  of  indus- 
try, and  a  "democratic"  use  of  the  powers  of  the  State. 
Moreover,  there  is  probably  a  common  agreement  in 
regard  to  heavy  inheritance  taxation  and  the  expropria- 
tion of  large  landed  wealth.  The  great  difference  of 
attitude  arises  in  regard  to  methods  of  action  and  to 
speed  in  attaining  their  ends.  Some  would  rely  on  in- 
dustrial action  alone,  that  is  on  a  policy  of  force;  some 
would  continue  political  and  industrial  action  sepa- 
rately; some  would  use  industrial  in  support  of  political 
action.  British  alliances  and  federations,  however, 
as  explained  by  labor  leaders  themselves,  claim  their 
organizations  will  be  a  means  of  avoiding  violent 
action.  They  aim  at  control  over  their  members  so 
that  unauthorized  strikes  will  be  impossible.  The 
unauthorized  strike,  they  believe,  will  be  unnecessary. 
The  more  radical,  however,  feel  that  the  rising  forces  of 
"democracy"  are  on  their  side  and  that  the  present 
capitalistic  system  is  doomed.  With  some  elements 
employers  obviously  can  expect  to  make  reasonable 
adjustments  if  both  sides  come  together.  With  the 
radical  element  it  must  be  at  once  admitted  that  even 
reasonable  proposals  are  not  likely  to  bring  about  per- 
manent adjustments,  inasmuch  as  their  ultimate  object 
is  the  control  of  industry,  nationalization  and  a  domi- 
nance over  the  State.  No  grant  of  intermediate  con- 
cessions will  stop  their  ultimate  demands. 

It  is  clear  that  the  policy  to  be  adopted  by  employers 
must  vary  with  the  existence  of  these  diflferent  elements 
in  the  establishments  of  the  employers.  For  this 
reason  a  method  of  communication  between  employers 
and  employees  by  such  machinery  as  Works  Com- 
mittees may  function  properly  with  workers  of  the 
less  radical  class.  A  machinery  by  which  discussions  of 
grievances  may  be  presented  and  fully  discussed  by 
both  sides  often  removes  the  possibility  of  friction  and 
strikes;  that  is.  Works  Committees  may  be  of  use 
under  these  conditions.    On  the  other  hand,  where  the 

13 


The  Policy 


radical  elements  are  reaching  out  for  the  control  of 
industry  it  may  happen  that  unofficial  Shop  Stewards 
and  their  committees  are  used  simply  as  a  means  of 
strengthening  their  position  for  further  advances. 
Hence,  while  such  methods  of  mutual  discussion 
have  their  advantages,  in  themselves  they  are  not 
a  complete  remedy,  since  much  depends  upon  the 
attitude  of  mind  on  both  sides  of  the  discussion  and 
upon  the  local  conditions  surrounding  the  industry. 

The  methods  of  trade  unionism  may  be  described 
in  general  as  those  of  collective  bargaining,  conciliation 
and  arbitration  to  prevent  and  settle  disputes,  a 
stoppage  of  industry,  or  political  action.  It  is  signifi- 
cant that  the  radical  element  does  not  care  for  the 
of  Force  ''  more  peaceful  methods,  but  is  inclined  to  the  fuller 

use  of  the  industrial  weapon.  The  industrial  unionists 
seek  the  abolition  of  the  State  and  the  substitution  of 
a  purely  industrial  society.  There  exists  a  well-defined 
policy  based  upon  force.  If  organized  effort  is  directed 
to  the  use  of  force,  it  is  clear  that  it  will  result  only 
in  resistance  quite  as  obstinate  by  the  other  elements 
of  society,  and  no  progress  is  likely  to  result.  If 
this  war  has  taught  us  one  thing  more  fully  than 
another,  it  is  that  force  is  a  wholly  inadequate  means 
to  produce  a  permanent  and  satisfying  result. 

Several  large  federations  exist  which  aim  at  industrial 
action,  as,  for  instance,  the  Triple  Alliance,  composed  of: 

(1)  The  Coal  Miners. 
The                                    (2)  The  Transport  Workers,  that  is,  Sailors,  Long- 
Triple  shoremen,  and  Drivers. 

(3)  The  Railwaymen. 

In  these  industries,  which  are  necessary  to  the 
daily  course  of  life,  the  workers  are  able  to  threaten 
the  stoppage  of  the  ordinary  functions  of  life  in  such  a 
city  as  London  for  the  purpose  of  gaining  their  indus- 
trial ends.  It  was  the  Triple  Alliance  which  brought 
about  the  industrial  crisis  in  England  in  February  and 
March,  1919. 

On  the  other  hand,  the  employers  wish  to  avoid 
force.  In  view  of  the  difficult  situation  produced  since 
the  war,  it  is  now  obvious  that  British  employers  are 
waking  up  and  searching  for  methods  of  establishing 

14 


Alliance 


better  relations  between  individual  employers  and 
their  workmen.  As  Sir  Allan  Smith  said  (February  27, 
1919)  to  the  unionists:  "You  arc  under  an  absolute 
misapprehension  as  to  the  attitude  of  the  employers 
in  the  present  state  of  difficulty  and  unrest.  Many  of 
the  employers  are  prepared  to  go  very  much  further 
in  the  amelioration  of  the  conditions  under  which 
you  work  than  some  of  you  have  any  idea  of." 

It  was  also  noted  by  your  Commission  that  extreme 
radicalism  was  confined  to  a  minority,  but  that  this 
minority  was  enterprising  and  noisy.  Indeed,  starting 
from  a  very  moderate  demand  for  state  interference, 
on  through  advanced  socialism,  there  were  insensible  p''Y?'.r'*' 
gradations  down  to  revolutionary  Bolshevism.  In 
British  unions  radicals  were  striving  to  wrest  control 
from  the  more  moderate  leaders  by  eflForts  to  get 
possession  of  the  machinery  of  Shop  Stewards  (men 
chosen  to  present  the  claims  of  laborers)  or  Shop  Com- 
mittees. There  is,  therefore,  a  fear  among  many 
employers  regarding  such  committees,  arising  from  a 
possibility  that,  when  the  total  labor  force  has  been 
incorporated  into  unions,  the  radicals  will  gain  control 
of  a  larger  power  with  which  to  dominate  employers 
and  the  Government. 

In  France  the  socialistic  radicals  elected  a  group  of 
deputies  who  have  a  large  political  influence;  but  the 
chief  labor  organization  has  officially  recognized  an 
economic  relation  between  wages  and  productive  eifi-  France 
ciency.  The  French  can,  however,  be  greatly  influenced 
in  conduct  by  ideas  rather  than  by  facts.  The  idea  that 
France  must  be  defended,  even  though  Germany  was 
stronger  and  better  prepared,  explains  why  she  rose  to 
the  occasion  so  marvelously  in  the  last  war.  There  is, 
therefore,  the  possibility  that  in  a  time  of  unrest  an 
idea  might  be  used  by  unscrupulous  leaders  to  arouse 
the  French  working  classes  to  a  sudden  frenzy.  In 
Italy  the  laborers  are  not  largely  unionized;  but  it 
is  the  active  radicals  who  dominate  the  unions,  while 
the  conservative  element  in  case  of  disputes  usually 
follows  the  radical  leadership. 

In  general,  it  was  found  in  Great  Britain,  France  and 
Italy  that  a  very  large  percentage  of  the  working 
classes  were  opposed  to  methods  of  force  or  to  action 
against  law  and  order.     As  a  consequence,  although 

15 


Italy 


EflBciency  of 
Production 
the  only 
Remedy 


British 

Employers 

not 

Generally  in 

Favor  of 

Complete 

Unionization 


Joint 

Councils  in 
Themselves 
not  a 
Remedy 


advanced  radicalism  Is  proposing  the  general  strike  and 
nationalization,  It  may  be  safely  concluded  that  Bol- 
shevism is  not  likely  to  produce  serious  disturbance  In 
these  three  countries. 

The  cost  of  living  in  Europe  has  gone  up  and  wages 
have  had  to  be  raised  accordingly;  but  this  set  of 
conditions  means  a  high  cost  of  production,  high 
prices  of  export  goods,  less  exports  and  lowered  com- 
petitive power  In  foreign  markets.  It  may  be  that 
this  situation  is  only  temporary;  that  high  costs  may 
fall  when  shipping  Is  released  from  war  duties,  freights 
fall,  materials  and  food  become  cheaper.  In  that  case, 
wages  could  fall  without  reducing  the  purchasing 
power  of  wages.  Meanwhile  the  only  way  out  is 
co-operation  between  employers  and  employees  In  a 
common  effort  to  Increase  the  efficiency  of  production. 
Unfortunately  the  labor  leaders  of  Great  Britain  and 
Italy  at  least  have  Indicated  no  such  purpose.  They 
are  striving  for  Increased  unionization  and  a  greater 
share  in  the  management,  often  without  reference  to 
efficiency  or  to  the  willingness  of  the  public  to  absorb 
the  product  at  the  higher  cost.  The  imperative  need  Is 
co-operative  action  to  get  larger  production  at  a  lower 
cost. 

Contrary  to  some  reports  that  have  come  to  this 
country,  much  evidence  was  given  to  us  that  British 
employers  were  not  all  In  favor  of  complete  unionization 
of  their  workers.  This  wrong  impression  may  be  due 
to  the  action  of  Governmental  agencies  in  urging  the 
formation  of  organizations  with  which  the  Government 
could  deal.  It  should  be  emphasized,  however,  that 
there  was  no  general  desire  on  the  part  of  employers  to 
encourage  organization  of  unions.  On  the  contrary, 
many  strongly  advised  American  producers  to  oppose 
this  tendency.  But  It  was  a  fact  that  employers'  fed- 
erations were  in  constant  negotiation  with  trade  unions 
and  had  a  complete  scheme  for  collective  bargaining. 

In  the  hope  of  bringing  about  a  better  state  of  mind  In 
England,  machinery  for  joint  discussion  between  em- 
ployers and  their  employees  has  been  devised.  Resort 
has  been  had  to  Shop  Committees  or  Councils,  especially 
In  large  establishments,  as  a  means  of  communication 
between  the  management  and  the  workers.  Un- 
doubtedly a  means  of  bringing  together  both  parties  to  a 

16 


difficulty  for  a  frank  exchange  of  views  is  likely  to  help 
in  creating  a  desirable  spirit.  Regarding  methods  of  im- 
proving the  conditions  of  labor  it  was  admitted  at  once 
that  many  employers  have  been  sluggish,  thoughtless, 
unobserving,  and  selfish;  and  that  they  are  largely 
responsible,  by  their  lack  of  prevision,  for  the  existing 
state  of  discontent.  But  it  is  a  mistake,  according  to 
our  view,  to  suppose  that  mere  machinery  for  joint 
discussion  is  likely  to  prove  a  cure-all.  Back  of  these 
proposals  lies  the  more  important  fundamental,  namely, 
the  spirit  and  reasonableness  of  both  parties  to  the  dis- 
cussion. At  present,  in  spite  of  the  existence  of  a  large 
body  of  reasonable  workers,  there  appears  to  be  a 
truculent,  bellicose,  and  threatening  attitude  on  the 
part  of  many  labor  leaders  which  is  not  promising. 
On  the  other  hand,  much  of  the  inertia  and  disregard 
of  the  needs  of  their  employees  by  employers  has 
vanished,  and  they  are  willing  to  go  a  long  way  to  meet 
the  demands  of  labor.  So  far,  radicals  have  only  too 
often  regarded  a  desire  by  employers  to  make  conces- 
sions as  a  sign  of  weakness.  Their  eyes  are  fixed  on  the 
ultimate  goal  of  a  reconstruction  of  society.  As 
already  observed,  only  too  often  a  concession  gained 
does  not  bring  satisfaction,  but  only  a  new  power  to 
be  used  in  making  additional  advances.  There  is 
needed  a  more  reasonable  spirit  among  labor  leaders 
and  a  disposition  to  see  the  practical  difficulties  of 
industry.  It  may  be  that  this  may  come  about  by 
joint  discussions.  Yet  the  acquiescence  in  new  pro- 
posals, new  legislation,  seems  only  to  indicate  to  radical 
leaders  that  nothing  is  likely  to  stop  their  progress. 

What  gives  the  British  employer  pause  in  regard  to 
encouraging  unionization  is  the  fear  as  to  the  policy 
likely  to  be  adopted  by  the  unions.  The  new  labor 
demands  are  not  for  joint  control  by  labor  and  capital, 
but  for  an  actual  transference  of  some  of  the  power  of 
capital  to  organized  labor.  The  movement  to  secure 
this  control  has  arisen  from  the  rank  and  file  of  the 
workers  and  has  expressed  itself  in  what  is  known  as 
the  "shop  stewards'  movement."  They  feel  that  the 
established  unions  do  not  voice  their  point  of  view. 
They  have,  therefore,  chosen  to  represent  them,  shop 
stewards,  who  have  formed  works  committees  and 
shop  committees  within  the  factory,  and  even  workers' 
committees     having     jurisdiction     over    most   of    the 

17 


State 
Interference 


Legislation 
Ineffective 


Whitley 
Councils 


factories  in  a  district.  Hence  this  sort  of  organization 
based  on  the  workshop  aims  at  a  policy  of  control. 
As  Mr.  Cole  says:  "A  shop  steward's  movement  may 
have  come  into  being  in  consequence  of  some  im- 
mediate grievance,  often  of  a  quite  minor  character; 
but  every  such  movement,  and  indeed  every  rank  and 
file  movement,  whatever  the  form  it  takes,  as  soon  as 
it  gets  down  to  reflection  upon  its  position,  adopts  a 
policy  which  plans  control  in  the  forefront  of  its  de- 
mands." Inasmuch  as  the  unions  are  trying  to  regu- 
larize the  shop  stewards,  there  is  a  fear  that  the  latter 
may  dominate  the  policy  of  the  unions. 

The  difficulties  of  reaching  an  adjustment  by  the 
organs  of  private  negotiations  have  led  to  an  appeal 
to  law.  Labor  leaders  abroad  in  the  last  ten  or  twenty 
years  have  been  eager  to  take  advantage  of  political 
action.  In  Great  Britain,  France  and  Italy  the  inter- 
ference of  the  State  in  labor  matters  has  been  frequent 
and  extensive.  There  is,  however,  no  evidence  to  show 
that  discontent  has  been  lessened  by  legislation.  In 
fact  the  issues  at  stake  are  not  of  a  kind  to  be  solved 
by  law,  —  any  more  than  trying  to  make  men  good  by 
law.  It  was  not  law  that  led  to  the  development  of 
industry,  but  the  process  of  saving  and  production  by 
individuals  prompted  by  self-interest,  and  only  re- 
ceiving from  the  State  protection  to  the  rights  of  person 
and  property. 

Politicians  have  been  watchful  of  new  issues  and  of 
the  opportunity  to  catch  votes.  A  Government  ap- 
pealing to  a  large  electorate,  like  that  in  Great  Britain, 
must,  in  order  to  keep  public  approval,  offer  some 
solution.  While  the  Reconstruction  Committee  had, 
of  course,  a  more  inclusive  purpose,  it  was  through 
its  sub-committee  on  "Relations  between  Employers 
and  Employed"  that  there  appeared  an  Interim 
Report  on  "Joint  Standing  Industrial  Councils," 
March  8,  1917,  named  after  its  chairman,  J.  H.  Whitley, 
M.P.  This  report  urged  the  organization  in  each 
industry  of  councils  chosen  from  both  employers  and 
workers  to  consider  matters  affecting  their  closer  co- 
operation, such  as  the  restoration  of  Trade  Union 
Restrictions  withdrawn  during  the  war.  The  full  scheme 
provides  in  each  industry  a  National  Joint  Standing 
Industrial  Council,  to  be  set  up  by  agreement  between 
employers'  associations  and  the  trade  unions  in  that 

18 


industry,  and  to  contain  equal  numbers  of  each  side; 
District  councils,  to  be  set  up  by  the  National  Council, 
and  to  be  similarly  constituted,  and  Works  Committees 
in  the  individual  plants.  The  purpose  is  to  grant  the 
workpeople  "a  greater  share  in  the  consideration  of 
matters  affecting  their  industry,"  such  as  (to  mention 
only  a  few)  fixing  wages,  piecework  rates,  security  of 
employment,  improvement  of  processes,  and  questions 
relating  to  management.  As  JVIr.  Cole  has  said  with 
regard  to  these  councils:  "The  working-class  demand 
for  a  growing  measure  of  exclusive  control  over  in- 
dustry has  been  freely  countered  by  the  oiTer  of  a 
partial  and  limited  joint  control  by  employers  and 
trade  union  representatives."  The  Government, 
through  the  Ministry  of  Labour,  is  urging  workers  and 
employers  to  establish  these  councils.  As  the  com- 
mittee suggested,  the  plan  could  work  only  where 
there  were  "responsible  associations  of  employers  and 
workpeople."  Hence,  we  have  an  explanation  of  the 
Government  policy  of  urging  a  complete  organization  of 
all  laborers  in  unions.  Substantially  all  the  employers 
consulted  felt  that,  where  a  disposition  existed  to  get 
on  with  employees  fairly,  these  councils  were  a  hin- 
drance rather  than  a  help,  because  the  pressure  of  the 
Government  on  employers  introduced  the  political  ele- 
ment; and  in  some  cases  the  settlement  by  District  or 
National  Councils  involved  decisions  by  persons  who 
misunderstood  local  conditions  and  hence  made 
adjustments  with  employees  more  difficult.  Neverthe- 
less, these  councils  are  in  fact  being  established  in  many 
British  industries. 

An  enlargement  of  the  Governmental  policy  in  Great 
Britain  regarding  labor  has  appeared  during  the  last  few 
months  in  the  creation  of  the  National  Industrial  Con- 
ference. The  credit  for  this  plan  is  claimed  by  The  Industrjal 
National  Alliance  of  Employers  and  Employed,  who 
suggested  it  to  the  Government.  On  F'ebruary  27, 
1919,  a  conference  of  800  employers  and  workers  was 
called  by  Lloyd-George,  this  being  a  time  of  a  very  tense 
labor  situation  and  serious  industrial  unrest.  It  seemed 
to  the  Government  that  it  must  ofTer  a  solution,  in- 
stead of  leaving  it  to  employers  and  employees.  The 
February  confer, nee  led  to  the  appointment  of  a  Joint 
Industrial  Conference  of  30  employers  and  30  labor 
delegates.      This    Joint    Conference,    March    4th,    ap- 

19 


Not  a 

Complete 

Solution 


International 
Labor 
Conference 
of  the 
Peace  Treaty 


pointed  three  sub-committees.  The  Sub-Committee 
on  the  Causes  of  the  "Present  Unrest  and  on  the 
Relations  of  Employers  and  Employees,"  made  an 
interim  report  in  April,  1919.  A  plan  was  proposed, 
the  essence  of  which  is  to  create  organizations  by  which 
the  Government  can  reach  both  employers  and  em- 
ployees. 

It  will  be  seen  at  once  that,  while  many  recom- 
mendations are  made,  no  solution  of  the  problem 
of  unrest  is  given,  —  only  the  machinery  for  joint  dis- 
cussion. In  fact,  additional  opportunity  is  offered  for 
the  urging  of  the  demands  of  labor.  This  being  the 
assumption,  it  is  obvious  why  the  Governmental 
policy  steadily  works  towards  granting  more  and  more 
of  these  demands  by  putting  political  pressure  upon 
employers.  All  wish  to  see  better  conditions  for  the 
workingmen;  the  question  as  to  how  they  are  to  be 
brought  about  is  the  pivotal  one.  The  public  is  be- 
coming saturated  with  the  idea  that  if  labor  makes 
demands,  they  must  be  met;  but  not  a  word  as  to 
the  means  with  which  the  employers  are  to  meet 
them;  if  higher  prices  to  consumers  are  not  to  follow, 
then  some  source  for  wages  must  be  found  not  indi- 
cated in  the  thinking  of  those  who  make  the  demands. 

The  most  considerable  introduction  of  politics  into 
the  industrial  question  has  been,  of  course,  the  forma- 
tion at  the  Paris  Peace  Conference  of  an  International 
Labor  Conference,  which  has  proposed  certain  clauses 
affecting  labor  to  be  inserted  into  the  Treaty  of  Peace. 
Of  the  nine  principles,  three  are  of  the  most  importance: 

1.  In  right  and  in  fact  the  labor  of  a  human  being  should 
not  be  treated  as  merchandise  or  an  article  of  commerce. 

4.  Every  worker  has  a  right  to  a  wage  adequate  to  main- 
tain a  reasonable  standard  of  life  having  regard  to  the 
civilization  of  his  time  and  country. 

7.  Limitation  of  the  hours  of  work  in  industry  on  the 
basis  of  eight  hours  a  day  or  forty-eight  hours  a  week, 
subject  to  an  exception  for  countries  in  which  climatic 
conditions,  the  imperfect  development  of  industrial  organ- 
ization or  other  special  circumstances  render  the  industrial 
efficiency  of  the  workers  substantially  different. 


Without    going    into    a    specific    discussion    of    the 
standard  of  living  or  the  eight-hour  day,  it  is  to  be  noted 

20 


that  these  primary  demands  of  organized  labor  have 
thus  been  given  international  advertising,  and  that  it  is 
intended  to  bring  the  pressure  of  all  Governments  to 
bear  on  the  adoption  by  each  country  of  such  a  measure 
as  an  eight-hour  day.  It  is  a  very  adroit  means  of 
establishing  in  the  minds  of  the  public,  who  have  not 
closely  followed  the  matter,  that  the  eight-hour  day  is 
coming  anyhow  and  hence  that  a  legal  enactment 
might  as  well  be  accepted  now  as  well  as  later.  While  it 
is  patent  that  such  a  law  cannot  be  applied  equally  to 
all  industries  or  to  all  kinds  of  workers,  —  and  the  Paris 
proposals  make  provision  for  some  exceptions,  —  yet 
the  inclusion  of  this  clause  in  the  Treaty  of  Peace 
makes  it  very  difficult  to  prevent  its  introduction  into 
kinds  of  work  where  it  would  be  wholly  inapplicable. 

The  immediate  effect  appeared  in  an  agitation  for  the 
passage  of  an  eight-hour  law  by  the  French  Corps 
Legislatif.  This  act  was  passed  April  18,  1919.  It  was 
a  part  of  the  general  understanding  to  say  that  it  was 
certain  also  to  be  enacted  by  national  legislation  in  the 
United  States;  that  it  was  coming  in  all  countries;  and 
this  misunderstanding  was  used  to  assure  the  passage 
of  the  French  law.  It  was  even  asserted  that  French 
employers  had  assented  to  its  enactment.  After  con- 
siderable inquiry  we  found  this  not  to  be  an  assent  with- 
out a  protest.  The  Minister  of  Labour  had  called  a 
conference  of  employers  and  labor  leaders  to  discuss 
the  proposed  eight-hour  law,  and  pressure  had  been 
exerted  on  the  employers.  The  latter  indeed  issued  a 
printed  protest  against  the  measure,  and  they  also 
urged  that  it  should  not  be  inserted  in  the  Treaty  of 
Peace.    It  was  declared: 

1.  That  the  total  production  of  France  before  the  war 
was  about  $8,000,000,000. 

2.  That  nearly  2,000,000  workers,  or  9  per  cent,  had  been 
killed  or  maimed. 

3.  That  in  workers  France  had  lost  one  and  one-half  times 
more  than  Germany,  two  and  one-half  times  more  than 
Belgium,  live  times  more  than  England  and  Italy,  fifty- 
six  times  more  than  the  United  States. 

4.  Together  with  the  frightful  reduction  in  births,  which 
would  continue  even  to  1930,  the  diminution  of  20  per  cent 
in  the  hours  of  labor  from  ten  to  eight  would  cause  a  reduc- 
tion in  the  total  production  of  France  of  §2,400,000,000, 
or  30  per  cent. 

21 


Eiljht-Hour 
Day 


Protest  of 

French 

Employers 

against  the 

Eight-Hour 

Law 


Coming  in  addition  to  the  systematic  destruction  in 
the  war,  which  had  not  been  suffered  by  its  com- 
petitors, the  uniform  and  rapid  reduction  of  the  labor 
day  to  eight  hours  would,  in  most  branches  of  national 
production,  according  to  the  protest,  be  a  disastrous 
influence  and  would  stimulate  the  exodus  of  labor  from 
the  land  to  the  cities.  In  many  of  the  French  indus- 
tries the  loss  of  human  dexterity  could  not  be  made  up 
by  any  introduction  of  machinery.  And  yet,  at  this 
critical  time,  taking  advantage  of  the  mental,  moral, 
and  industrial  upheaval,  politics  were  being  played 
with  the  labor  question,  so  that  the  law  was  quickly 
enacted  by  the  Chamber  of  Deputies  and  the  Senate. 

In  Italy,  politics  had  already  been  interwoven  with 
industrial  questions.     As  has  been  said,  only  a  small 
percentage  of  laborers  is  organized  into  unions;    but 
the  extreme  radicals  control  them.    They  are  the  ones 
.  who  make  speeches,  threaten,  and,  when  striking,  resort 

Day  in   °"'"        to  violence.     Thus  they  frighten  the  general  body  of 
Italy  peaceful  workers  into  joining  them  in  any  crisis;    and 

they  succeed  in  intimidating  the  employers.  In  recent 
months,  of  course,  the  absorbing  question  in  Italy  has 
been  her  attitude  to  the  proposed  terms  of  peace. 
Taking  advantage  of  this  situation  the  extremists  have 
increased  their  demands  and  to  avoid  a  general  strike 
while  the  Peace  Congress  was  in  session  at  Paris,  the 
Government  brought  great  pressure  to  bear  on  em- 
ployers to  meet  the  demands  of  labor.  As  a  conse- 
quence, not  so  much  because  of  the  demands  of  or- 
ganized labor  as  to  meet  the  exigencies  of  politics,  the 
employers  have  generally  accepted  the  principle  of  the 
eight-hour  day.  In  the  metal  trades,  owing  to  slack 
discipline,  the  old  ten-hour  day  was  only  equivalent 
to  about  nine;  so  that  the  change  was  really  only  from 
nine  to  eight  hours.  In  the  textile  trades,  however, 
the  new  act  will  be  almost  certainly  disastrous.  As 
compared  with  the  pre-war  period,  labor  costs  in  the 
cotton  mills  at  the  present  day  have  been  trebled.  In 
reeling  and  throwing  silk,  costs  are  now  40  per  cent 
above  those  of  Japan,  who  has  driven  Italy  out  of  the 
American  market.  In  March,  silk  wages  were  raised  20 
per  cent;  and  now  the  additional  payment  of  ten  hours' 
wages  for  eight  hours'  work  will  be  so  ruinous  that  the 
mills  will  shut  down  rather  than  yield.  Although  the 
Government  had  bought  up  the  silk  crop  under  a 
valorization  scheme,  it  favored  the  eight-hour  law. 

22 


Little 
Attention 


CHAPTER  IV 

MANAGEMENT 

In  the  whole  discussion  of  Libor  and  its  rewards, 
both  in  Europe  and  this  country,  there  is  a  lack  of 
understanding  as  to  the  function  and  wages  of  man- 
agement in  industry.  The  British  worlvcrs  regard 
management  and  capital  as  jointly  antagonistic  to 
labor.  On  the  side  of  employers  there  is  little  dis- 
position to  analyze  the  general  term  "profits"  and  find  civen'to" 
out  how  much  of  their  return  is  due  to  the  mere  pos-  Management 
session  of  capital  (either  invested  or  borrowed);  how 
much  txy  insurance  against  the  various  risks  of  bad 
debts,  seasons,  unexpected  panics,  wars,  obsolete 
machinery  due  to  new  inventions,  etc.;  and  how  much 
to  brains  and  skill  of  management.  Such  ambiguity, 
where  the  owner  of  the  capital  is  also  his  own  manager, 
is  perhaps  natural,  but  in  these  days  of  large  produc- 
tion, which  has  necessitated  the  use  of  the  corporation, 
the  separation  of  the  management  from  the  share- 
holders (or  owners  of  capital)  is  known  to  all.  More- 
over, as  concerns  grow  larger  and  operations  become 
more  extensive,  a  division  of  the  various  duties  of  the 
management  into  separate  branches  has  become  in- 
evitable. Such  a  breaking  up  of  what  was  once  re- 
garded as  the  function  of  one  manager  has  thrown 
much  light  on  the  relation  of  management  to  the  other 
necessary  factors  of  production. 

In  trying  to  get  a  practical  understanding  of  the 
function  of  management  it  is  clear  that  it  covers  the 
following  heads : 

(a)  Buying   of   materials   at   the   right  time,  foreseeing  Functions 
market    conditions    often    throughout    the    world,    and  of  a 
deciding  how  far  to  go  in  storing  supplies  ahead.     Ques-  Manager 
tions  of  foreign  imports  and  the  price  of  exchange  are  to 

be  mastered. 

(b)  Technical  processes.  The  state  of  the  arts  in  all  coun- 
tries, the  power  to  decide  whether  a  new  invention  will  be 
a  commercial  success,  good  judgment  in  adjusting  ma- 
chinery to  floor  space  and  sequence  of  processes,  are  matters 
requiring  a  special  training  for  years  in  any  one  industry. 

23 


Manager 
Bom,  not 
Made 


Manager  a 

SkUled 

Laborer 


(c)  Selling.  To  know  accurately  home  and  foreign 
markets,  to  devise  the  best  selling  agencies  for  a  particular 
kind  of  product,  to  know  when  to  sell  and  at  what  price,  is 
vital  to  the  continuance  of  the  industry. 

(d)  Financing  all  operations  involved  in  buying  and  sell- 
ing, determining  the  form  of  credit,  discriminating  among 
buyers  as  to  integrity  and  promptness  of  payment,  intro- 
ducing cost  accounting,  borrowing  capital,  discounting 
paper,  while  dependent  on  an  expert  knowledge  of  banking 
at  home  and  abroad,  require  a  very  exceptional  ability 
among  managers. 

(e)  Organization.  The  capacity  to  organize  an  industry 
into  a  well-knit  whole,  to  know  human  nature,  and  to  have 
an  instinct  for  selecting  the  right  man  for  a  given  duty,  to 
keep  all  parts  of  the  institution  in  proper  co-ordination, 
to  reserve  leisure  to  think,  and  to  keep  a  grasp  on  the 
industrial  tendencies  of  the  whole  world,  is  essential  to  the 
highest  type  of  an  executive. 

The  industrial  manager  is  not  a  product  of  books  or 
education.  He  is  born,  not  made.  Training  and 
education  will  add  to  his  intelligence  and  power,  but  his 
bent  is  intrinsic.  He  is  found  only  by  being  tried  out  in 
actual  experience.  He  comes  to  the  top  only  by  virtue 
of  a  great  need  for  such  men  and  by  a  demonstration  of 
his  capacity  to  satisfy  that  need.  An  artist  may  make  a 
poor  mathematician  and  the  son  of  a  rich  man  may 
make  a  poor  manager;  while  the  son  of  the  soil  may 
develop  a  capacity  for  organization  which  may  place 
him  in  control  of  a  house  named  after  a  founder  of 
years  long  gone  by.  The  manager  is  the  pivot  of 
success  for  any  concern.  He  is  the  most  important 
figure  in  the  life  of  industry.  He  it  is  who  makes  em- 
ployment possible  for  a  labor  force  of  thousands;  and 
yet  he  is  almost  always  a  salaried  man. 

It  becomes  obvious,  then,  that  a  manager  is  a  man 
paid  for  certain  very  necessary  services  to  industry. 
He  is  not  paid  for  the  possession  of  capital.  If  one  were 
asked  to  define  any  form  of  labor,  it  would  be  said  that 
a  laborer  is  a  person  who  provides  a  service  to  industry, 
either  physical  or  mental,  in  return  for  an  agreed  upon 
payment.  Therefore,  a  manager  is  a  member  of  the 
laboring  classes,  only  he  is  distinguished  by  being  a 
highly  skilled  laborer.  The  services  he  renders  are 
those  of  a  human  being  employed  in  industry.  His 
function  is  that  of  a  rare,  skilled  worker. 

24 


When  using  the  word  "labor"  it  is  to  be  remembered 
that  it  is  general  in  its  meaning,  like  the  word  "trees." 
There  are  various  kinds  of  labor  just  as  there  are 
various  kinds  of  trees.  From  the  unskilled  manual 
laborer  with  the  pick  and  shovel  there  are  strata  of  the 
slightly  skilled,  the  trained  artisan,  the  skilled  me- 
chanic, the  civil  or  mechanical  engineer,  the  specialist,  ^^.^^^ 
up  to  the  best  known  organizers.  The  highest  grade  ManW-rial 
of  labor  differs  from  another  chiefly  in  capacity  f<jr  Wages  Due 
better  serving  the  purposes  of  industry.  Moreover,  the  ^"  -^^^'^r^'ty 
wages  of  the  manager  are  determined  on  the  same 
principle  as  that  of  any  skilled  labor.  That  is  the 
principle  of  scarcity.  If  skilled  carpenters  were  as 
numerous  as  day  laborers  they  could  get  no  more  than 
the  latter.  The  mere  fact  of  skill  produces  a  limited 
class.  Further,  the  skilled  hold  their  own  because  they 
add  either  quantity  or  quality  to  the  product.  There  is 
thus  a  relation  between  what  they  produce  and  what 
they  receive.  If  any  man  taken  at  random  off  the  street 
were  as  competent  to  manage  successfully  a  bank,  a 
factory,  a  railway,  or  a  shipbuilding  plant,  then  man- 
agers' wages  would  be  as  low  as  that  of  day  labor. 
But,  in  fact,  good  managers,  because  of  the  difficulties 
of  their  positions,  are  very  scarce,  and  the  demand  for 
them,  as  industry  expands,  becomes  increasingly  in- 
tense. The  man  who,  during  the  war,  has  shown  high 
executive  ability  has  been  pursued  by  the  offer  of  very 
high  wages.  The  reason  why  one  man  gets  only  S400  a 
year  and  another  gets  $40,000  is  that  marked  capacity 
is  rare.  Indeed,  if  a  manager  is  successful  in  building  up 
the  business  of  a  large  factory  or  a  railway,  —  often  tak- 
ing it  out  of  bankruptcy,  —  he  may  gain  millions  for  his 
company,  out  of  which  his  managerial  wages  form  an 
insignificant  fraction.  A  highly  paid  manager  is,  there- 
fore, often  the  cheapest  man  to  his  company.  The 
manager  is  a  laborer,  and  it  is  open  to  any  other  laborer 
of  skill  to  obtain  the  wages  of  skill  if  he  has  the  ca- 
pacity. That  is,  the  struggle  for  higher  wages  is  not 
primarily  a  struggle  between  labor  on  the  one  hand  and 
capital  on  the  other,  but  a  struggle  between  differing 
grades  of  labor  accordingly  as  they  possess  more  or  less 
industrial  capacity.  To  demand  higher  wages  without 
any  regard  to  capacity  and  skill  leads  only  to  a  deadlock 
and  a  fight  against  a  rising  cost  of  production,  higher 
prices,  and  a  higher  cost  of  living  to  all  persons  having 
fixed  incomes. 

25 


Managerial 
Function  of 
Directors 


Labor 
Demands 
Share  in 
Management 


It  is  to  be  noted,  also,  that  managerial  functions  are 
exercised  not  only  by  executive  managers  but  also  by 
the  directors  of  corporations.  The  success  of  modern 
business  operations  on  a  large  scale  often  depends 
more  upon  the  sound  judgment,  foresight,  ability  and 
industrial  experience  of  directors  than  on  the  executives 
chosen  by  them.  For  their  services  to  industry  they 
deserve  a  suitable  reward.  In  practice  thay  receive  no 
wages  of  management.  They  are,  in  fact,  recompensed 
only  by  the  larger  dividends  they  receive  as  stock- 
holders whenever  the  success  of  their  policies  brings  in 
larger  returns  to  the  companies  which  they  serve. 
Hence,  large  dividends  in  many  cases  are  due  to  the 
skill  of  management  of  men  who  are  not  often  recog- 
nized, but  who  are  nevertheless  the  true  causes  of 
industrial  success.  Without  them  earnings  would 
disappear.  The  presence  of  these  earnings  of  skill  is 
no  reason  why  they  should  be  claimed  by  some  other 
factor  of  production  that  could  not  have  been  the 
cause  of  them. 

In  Great  Britain,  where  the  demands  of  labor  have 
been  carried  to  the  greatest  extreme,  various  intentions 
as  to  the  extent  of  control  over  management  have  been 
expressed.  It  is  urged  that  if  the  workers  had  a  larger 
share  in  the  management  of  industry  they  would  so 
modify  the  methods  of  distribution  that  an  increased 
product  would  increase  wages;  in  that  case  they  claim 
that  there  would  be  no  opposition  by  the  workers  to 
exerting  effort  to  enlarge  productivity.  It  was  also 
held  that  as  long  as  companies  showed  large  profits 
they  had  the  means  for  paying  higher  wages.  On  the 
other  side,  it  was  claimed  by  the  employer  that  so- 
called  profits  were  much  misunderstood,  and  were  really 
not  in  the  form  of  cash,  but  only  a  statement  of  what 
had  bejn  taken  from  the  yearly  proceeds  of  the  industry 
for  depreciation,  risk,  and  the  enlargement  of  the  in- 
dustry, so  that'more  labor  could  be  employed  and  more 
product  turned  out  in  the  future;  that  statements  as 
to  earnings  were  misleading,  that  they  often  were  only 
statements  on  paper  of  the  form  in  which  parts  of  the 
proceeds  from  the  sales  of  goods  had  gone  into  various 
forms  of  the  industry.  The  opposition  on  the  part  of 
some  workers  to  the  necessary  setting  up  of  reserves 
and  the  use  of  profits  for  the  expansion  of  business 
facilities  is  most  unfortunate. 


26 


Some  explain  that  labor  organizations  aim  only 
at  a  share  of  control  over  shop  conditions;  but,  in 
fact,  the  most  intelligent  and  enterprising  leaders, 
while  admitting  that  laborers  may  not  now  have  in  their 
ranks  men  competent  to  assume  charge  of  all  the 
functions  of  management,  evidently  look  forward  to  the 
assumption  of  the  supreme  tasks  of  management 
sooner  or  later.  Their  purpose,  however,  in  attempting 
to  gain  control  is  not  so  much  to  increase  the  efficiency 
of  production  as  to  obtain  a  position  of  authority 
through  which  wages  may  be  fixed  at  a  rate  more 
satisfying  to  the  recipients  of  wages.  That  is,  it  is 
assumed  that  wages  can  be  increased  at  the  expense  of 
some  other  factor  in  production.  In  the  event  that  the 
workers  should  obtain  control  of  industry,  it  is  clear 
that  it  would  result  only  in  an  exchange  of  managers. 
They  do  not  seem  to  realize  that  managerial  jobs  would 
be  found  only  for  a  few  new  managers  in  place  of  the 
old,  and  that  the  new  managers  would  have  to  succeed 
in  all  the  functions  above  indicated;  otherwise,  the 
business  would  fail  and  loss  to  all  would  follow. 

It  is  to  be  remembered,  when  organized  labor  refers 
to  the  high  published  rates  of  dividends  of  some  com- 
panies as  an  evidence  that  they  can  pay  higher  wages, 
that  in  many  cases  the  increased  productivity  yielding  increased 
such  results  has  not  been  traceable  to  the  workers;  in  Productivity 
truth,  it  has  been  due  to  the  devising  minds  in  the 
management.  The  steady  increase  in  wages  during 
many  past  decades  has  often  been  possible  only  because 
methods  and  machinery  have  enabled  a  larger  return  to 
be  earned  out  of  which  higher  wages  could  be  paid. 
There  are  numerous  proofs  of  this  general  statement 
in  our  own  economic  history;  but  it  has  been  signally 
verified  by  frequent  instances  which  developed  in  the 
course  of  war  production  in  the  United  States. 


Not  Due 
To  Labor 


New 
Spirit  of 
English 
Employers 


CHAPTER  V 
FURTHER  OBSERVATIONS 

The  most  important  object  of  your  Commission  was 
so  to  study  European  conditions  as  to  be  able  to  indicate 
the  main  lessons  which  could  be  brought  home  to  our 
producers  for  their  guidance  and  enlightenment. 

In  Great  Britain  wages  in  the  past  have  undoubtedly 
been  very  low.  In  spite  of  a  low  cost  of  living,  condi- 
tions were  extremely  unsatisfactory.  In  all  our  inter- 
views we  were  most  impressed  by  the  conviction  of 
British  employers,  freely  spoken  and  strongly  em- 
phasized, that  the  grave  situation  which  has  now  arisen 
between  employers  and  employees  is  mainly  due  to  the 
neglect  by  employers  for  years  past  of  a  proper  interest 
in  their  employees.  There  is  now  no  question  as  to  their 
wakening  to  the  situation,  and  as  to  a  desire  to  correct 
the  wrongs  of  the  past  in  a  fine  spirit  of  humanitarianism 
and  fair  play;  and  they  recognize  that  their  workers 
should  have  greater  opportunities  and  better  conditions 
of  life.  Many  of  them  are  conscientiously  engaged  in 
trying  to  find  the  means  to  bring  about  this  end.  If  the 
attitude  of  labor  leaders  shall  continue  to  be  uncom- 
promising and  radical,  without  any  spirit  of  co-opera- 
tion, demanding  restrictions  on  production  at  the  same 
time  that  they  ask  for  shorter  hours  and  increased 
wages,  there  is  before  Great  Britain  a  very  serious 
period  of  disturbance  to  industry  until  both  sides 
reach,  by  sad  experience,  some  basis  of  co-operation 
based  on  sound  economic  principles.  Practically  all  the 
employers  interviewed  in  Great  Britain  strongly 
advised  against  the  complete  organization  of  employees 
or  the  urging  of  any  policy  which  would  lead  to  that  end. 
They  did  not  favor  a  development  of  labor  unionism  as 
such  because  of  the  practical  difficulties  in  securing  a 
conservative  attitude  of  mind  among  labor  leaders. 
They  would  welcome  and  co-operate,  however,  with  a 
more  moderate  and  conservative  unionism.  Granting 
this  type  of  co-operation  it  is  possible  that  English 
managers  may  have  learned  so  much  as  to  modern 
equipment  and   business  organization    that  they  may 

28 


greatly  improve  their  position   in   international   com- 
petition. 

From  France,  the  lessons  to  be  drawn  are  very- 
different  from  those  of  Great  Britain.  The  shortage  of 
labor  before  the  war  and  the  terrible  losses  on  the 
battlefield  have  produced  a  marked  result  on  the 
thinking  of  French  workingmcn  and  their  leaders, 
so  that,  as  above  stated,  they  no  longer  oppose  the 
introduction  of  labor-saving  machinery  and  methods 
for  furthering  efficiency  of  production,  but  even 
demand  that  employers  provide  the  most  efficient 
methods  and  equipment.  Moreover,  as  the  establish- 
ments employing  over  50  laborers  are  few,  the  relation 
between  employers  and  their  workers  is  generally  inti- 
mate. As  the  unions  include  not  over  20  per  cent  of  the 
laborers,  a  strike  is  not  likely  to  be  as  serious  as  in  Great 
Britain.  Although  the  newspapers  report  great  activity 
by  the  Bolshevists  and  extreme  radicals,  the  labor 
situation  is  not  regarded  as  very  serious.  The  great 
body  of  French  workmen  are  not  in  favor  of  violence 
and  lawless  methods.  There  may  be  deduced  from  the 
French  situation  a  lesson  that  labor's  best  interests 
are  served  by  co-operation  with  management  in 
securing  the  highest  efficiency  of  production. 

The  really  difficult  problem  in  France  today  is  to  find 
the  credit  with  which  to  obtain  coal,  materials,  and,  in 
the  devastated  area,  machinery  to  enable  the  factories 
to  employ  labor,  turn  out  goods,  begin  to  export,  and 
help  to  improve  the  foreign  exchange  and  the  value  of 
the  franc.  The  burden  of  the  debt  is  very  heavy.  In 
the  past  indirect  taxes  have  been  relied  on.  Today  the 
country  is  faced  with  the  necessity  of  a  resort  to  direct 
taxes,  especially  on  incomes,  to  which  there  will  be 
bitter  opposition  by  the  peasants  as  well  as  by  the 
middle  and  richer  classes.  Unless  such  taxes  are  im- 
posed there  can  be  no  proof  to  her  creditors  that  France 
can  carry  not  only  the  interest  on  her  debt,  but  also  the 
other  burdens  of  the  war,  together  with  her  normal 
budget.  Until  this  proof  is  given,  little  credit  is  likely 
to  be  forthcoming.  But  the  new  taxation  would  be  so 
unpopular  that  any  ministry  proposing  it  would  be 
driven  from  office.  In  such  a  situation  business  is 
largely  at  a  standstill;  and,  it  must  be  added,  there 
seems  to  be  on  the  part  of  governmental  authority  a 
very  inexplicable  opposition  (now  tending  to  pass  away) 

29 


Lesson  from 
France 


Credit  for 
France 


to  imports,  a  policy  which  prevents  any  considerable 
employment  of  labor.  This  policy  seems  to  be  due  partly 
to  a  desire  to  protect  the  foreign  exchanges  and  partly 
to  shield  French  dealers  at  home  from  foreign  com- 
petition. Hence  the  revival  of  her  normal  industry 
must  come  slowly.  The  reliance  on  the  German  indem- 
nity will  not  bring  early  or  certain  recovery.  France 
must,  as  often  before,  rely  on  the  thrift  and  persistent 
industry  of  her  people.  The  socialistic  influences  in  her 
Chamber  of  Deputies  attract  attention  but  do  little  to 
save  the  day. 

In  Italy,  since  only  a  small  percentage  of  the  laborers 
are  organized  and  since  these  are  now  dominated  by  ex- 
tremists, some  Italians  suggested  that,  if  all  workers 
were  organized  the  action  of  the  unions  would  be  more 
^^^^  conservative.    But  'n  Great  Britain,  where  most  of  the 

men  were  organized,  the  supposedly  conservative 
elements  were  either  unable  to  control  the  radical 
elements,  or,  as  was  usual,  they  did  not  sufficiently 
interest  themselves  in  union  affairs  to  make  their 
influence  felt.  It  is  believed  by  your  Commission  that 
the  Italian  employers  would  drift  into  exactly  the  same 
situation  as  that  in  Great  Britain  if  their  workers  be- 
came fully  organized,  so  that  the  radicals  could  wield  a 
heavier  club.  Herein  lies  a  lesson  for  the  United  States. 
The  outcome  of  a  wrong  point  of  view  in  Great  Britain 
and  Italy  should  serve  as  a  warning  to  keep  industry 
in  the  United  States  from  drifting  into  the  same 
difficulties. 


There  can  be  no  doubt  that  the  modern  ebullition  of  a 
radical  labor  doctrine  has  made  adjustment  difficult. 
The  tendency  of  unionism  has  been  to  discourage  in- 
dividuality and  ambition.    It  has  demanded  that  labor 
Labor  not  should  not  be  regarded  as  a  commodity.    It  is  true  that 

ommo  ity  |^j^qj.  should  unmistakably  be  regarded  as  the  effort  of 
human  beings;  and  the  inevitable  corollary  follows: 
that  human  beings  vary  widely  in  industrial  capacity 
and  efficiency;  practically  no  two  are  alike.  Although 
the  meaning  of  the  phrase  that  labor  should  not  be 
regarded  as  a  commodity  is  not  clear,  it  is  implied 
that  wages  should  not  be  determined  by  demand  and 
supply,  that  is,  by  skill  or  scarcity  or  by  productive 

30 


capacity,  but  sliould  be  paid  on  the  basis  of  needs  as 
a  human  creature;  that,  whether  abundant  or  not, 
all  labor  should  be  paid  a  wage  sufficient  to  provide 
not  only  the  necessaries  of  life,  but  also  comforts 
and  recreation;  that,  if  the  cost  of  living  rises,  wages 
should  rise  perforce.  Such  a  theory,  of  course,  as- 
sumes an  inexhaustible  source  from  which  increasing 
wages  can  be  drawn.  If  wages  are  claimed  for  men 
as  human  beings,  irrespective  of  their  inequality  or 
difference  in  productive  capacity,  that  would  lead 
in  turn  to  a  still  higher  cost  of  production  and  a  still 
higher  cost  of  living.  Antagonism  against  privilege 
and  monopoly  is  a  characteristic  of  the  present  times. 
One  craft  or  one  union,  therefore,  cannot  hope  to 
better  its  conditions  by  trying  to  obtain  a  monopoly  of 
high  wages  that  is  at  the  expense  of  all  other  workers; 
but,  even  if  all  workers  by  organization  and  compulsion 
should  be  able  to  force  a  proportionate  increase  in 
wages,  it  inevitably  follows  that  no  one  would  be 
benefited  by  the  ultimate  result,  because  there  would 
ensue  a  corresponding  increase  in  the  cost  of  living  to 
all  members  of  society.  We  cannot  reason  from  the 
conditions  during  the  war.  In  that  period,  if  em- 
ployers made  "concessions,"  they  were  necessarily 
made  on  the  assumption  that  the  increased  cost  could  be 
passed  on  to  the  purchaser.  So  long  as  the  purchaser 
was  the  Government,  the  increased  cost  was  taken  up 
in  the  national  debt;  but  in  times  of  peace  the  general 
body  of  purchasers  bears  the  burden;  the  workers 
are,  obviously,  a  part  of  the  consumers,  and  their  condi- 
tion is  affected  not  only  by  the  wages  they  receive  but 
also  by  the  prices  charged.  There  is  no  way  out  in  that 
direction.  Indeed  there  is  no  other  permanent  way  to 
bring  about  higher  wages  than  by  creating  higher  in- 
dividual productivity.  Employers  and  employees 
should  be  as  one  in  enforcing  this  principle;  and  em- 
ployers can  best  serve  the  common  interests  of  both 
laborers  and  producers  by  encouraging  industrial 
training  and  every  possible  plan  for  instructing  their 
employees  so  that  their  productive  efficiency  can  be 
promoted.  Then  wages  should  rise  with  the  rise  in 
industrial  efficiency.  That  is  the  crux  of  the  whole 
matter. 

By  many  labor  leaders  no  such  conclusion  will,  during 
the    present    radical    upheaval,    be    easily    accepted. 

31 


Two  Ways 
to  Get 
Higher 
Wages 


Remedy 
not  a 
Unionization 


Shop 
Councils 


They  are  pointing  to  control  of  industry  and 
nationalization  as  a  means  of  changing  the  system  of 
distribution  and  raising  the  share  of  labor.  Any  con- 
cession gained  by  pressure  towards  this  end  is  accepted 
as  a  matter  of  course,  not  as  a  basis  for  content,  but 
as  a  new  starting  point  for  a  further  advance  to  their 
objective.  The  public  does  not  realize  this  attitude.  It 
is  sympathetically  assumed  that  "something  must  be 
done"  for  labor,  because  wages  are  too  low,  and  that 
employers  should  make  "concessions."  In  truth,  two 
different  points  of  view  are  being  confused.  On  the  one 
hand,  there  is  a  way  to  increase  a  laborer's  standard  of 
living  by  developing  his  productive  power;  on  the  other 
hand,  disregarding  such  a  method  as  too  slow,  and, 
unwilling  to  recognize  that  men  are  industrially  un- 
equal in  capacity,  some  labor  leaders  of  the  present  day 
propose  a  short  cut  to  higher  returns  by  overturning 
the  present  social  order. 

This  general  policy  may  seem  very  distant  to  Ameri- 
cans, but  the  tendency  to  Government  ownership  is  one 
indication  of  a  movement  in  this  direction.  Too 
often  it  is  the  first  step  that  costs.  Already  our  own 
experience  throws  some  light  on  this  policy.  The 
demoralization  and  inefficiency  of  the  railway  and 
telegraph  companies  under  Government  management 
in  the  United  States,  during  the  war  and  after  the 
armistice,  give  striking  evidence  against  the  efficiency 
of  governmental  ownership. 

The  study  of  British  conditions  convinced  us  that 
the  remedy  for  industrial  discontent  was  not  to  be 
found,  as  some  have  asserted,  in  the  complete  inclusion 
of  all  laborers  in  the  unions.  With  the  present  known 
attitude  of  labor  leaders,  a  thorough  unionization  of  all 
workers  would  only  mean  handing  over  to  them  a 
greater  power  for  radical  action  and  for  the  eventual 
destruction  of  orderly  government.  Moreover,  many 
British  employers  realize  this  to  be  the  issue;  and  they 
are  hesitant  to  follow  the 'urging  of  governmental 
officials  to  join  in  universal  joint  conferences  for  dis- 
cussion of  labor  troubles.  What  is  fundamental  is  not 
the  means  for  joint  discussion,  but  the  creation  of  such 
a  normal,  rational  point  of  view  on  both  sides  as  will 
allow  of  co-operation  towards  increasing  productivity. 
It  is  possible,  however,  that  joint  discussion  may  help  to 
bring  about  a  helpful  point  of  view.     But  if  there  is 

32 


evident  Ja  hostile,  radical  clement  insisting  on  shop 
stewards  and  works  councils,  with  the  obvious  purpose 
of  using  them  against  the  employer  through  methods 
of  threats  and  force  to  gain  concessions,  then  such 
machinery  is  worse  than  useless  as  a  means  of  adjust- 
ment. Behind  all  mechanical  devices  for  bringing 
employers  and  employees  together  there  lies  the 
necessity  of  first  reaching  a  right  attitude  of  mind.  So 
far  it  has  not  been  shown  by  experience  that  joint 
councils,  or  joint  industrial  conferences  in  them- 
selves, can  or  have  brought  about  that  desired  attitude 
of  mind.  In  themselves  they  are  no  remedy  for  dis- 
content. 

In  regard  to  the  associations  of  employers  in  Great 
Britain  there  was  apparent  the  usual  individualistic  atti- 
tude which  made  co-operation  difficult.  The  peculiar 
conditions  of  the  war,  no  doubt,  changed  this  attitude 
more  or  less.  The  necessity  for  the  Government  to  A^ocS^Tions 
deal  with  all  the  producers  in  a  given  industry  made 
it  necessary  to  form  organizations  of  employers. 
Moreover,  the  growth  in  trade  union  organization  was 
stimulated  by  the  war;  hence,  in  self-defense  the 
employers  sought  to  increase  the  strength  of  their 
organizations  so  as  to  at  least  parallel  that  of  the  trade 
unions.  While  some  employers'  organizations  are 
essentially  only  a  means  of  self-defense  when  they  are 
face  to  face  with  a  militant  and  threatening  organiza- 
tion of  labor,  some  associations,  like  that  of  the  Fed- 
eration of  British  Industries,  have  for  their  aims  the 
promotion  of  active  co-operation  between  employers 
and  employed  on  questions  generally  affecting  labor. 
In  France  employers  are  organized  mainly  within  the 
lines  of  each  industry.  There  seems  to  be  no  national 
organization  of  producers.  In  Italy  employers  in  the 
North  have  organized  to  act  in  unison  on  such  questions 
as  the  eight-hour  day  and  a  minimum  wage. 

Without  doubt  the  main  recommendation  of  your 
Commission  to  American  industrialists,  after  its  ex- 
amination of  conditions  abroad,  is  that  each  employer 
should  regard  it  as  his  personal  duty  to  establish  direct  Duty  of 
and  cordial  relations  with  his  workers.  It  will  not  do  to  Employer* 
drift  into  a  policy  of  neglect,  as  have  some  British  em- 
ployers in  the  past,  which  has  borne  such  bitter  fruit 
in  the  dissatisfaction  of  the  present  day.  The  em- 
ployer must  see  to  it  that  no  charge  can  be  brought 

33 


Employers 
Must  Take 
the  Lead 


against  him  of  not  Intelligently  looking  out  for  the 
Interests  of  the  rank  and  file  in  his  establishment.  The 
examples  of  Lever,  Cadbury  and  Rowntree  among 
British  eniployers  have  already  been  equaled  in  this 
country,  but  their  example  is  nevertheless  to  the 
point.  For  us  the  point  is  that  everything  depends 
upon  the  spirit  of  humanity  and  sympathy  which 
animates  both  parties  to  the  wages  contract.  First  of 
all,  more  is  expected  of  the  fortunate  and  successful, 
because  of  noblesse  oblige,  than  of  those  who  have  had 
less  opportunity  and  success.  The  employer  must 
take  the  lead;  much  in  the  way  of  leadership  is  ex- 
pected of  him.  He  must  generally  plan  to  prevent 
grievances  from  rising  by  showing  a  genuine  interest  in 
a  fair  system  of  remuneration,  in  healthful  shop  condi- 
tions, the  proper  and  sanitary  housing  of  his  workers, 
and  the  welfare  of  the  community  in  which  his  plant 
is  located.  If  he  is  really  at  heart  trying  to  raise  the 
standard  of  living,  as  he  ought,  of  his  employees,  he 
should,  moreover,  be  occupied  not  only  with  questions  of 
wages  or  material  rewards,  but  with  matters  which 
will  cultivate  the  intelligence,  morals  and  character  of 
men.  Granting  this  attitude  of  mind,  then,  there  must 
be  a  corresponding  point  of  view  on  the  part  of  labor  If 
any  permanent  and  peaceful  adjustment  Is  to  be 
accomplished. 


34 


188603 


Publications 

of  the 

National    Industrial    Conference    Board 

15  Beacon  Street,  Boston,  Mass. 


Research  Report  No.  1.  Workmen's  Compensation  Acts  in  the  United 
States  —  The  Legal  Phase.  62  pages.  April,  1917.  Revised, 
April,  1919.    $1.00. 

Research  Report  No.  2.  Analysis  of  British  Wartime  Reports  on  Hours 
OF  Work  as  Related  to  Output  and  Fatigue.   58  pages.    November, 

1917.  $1.00. 

Research  Report  No.  S.      Strikes    in    American    Industry    in    Wartime. 

20  pages.    March,  1918.    50  cents. 
Research  Report  No.  4.      Hours   of   Work   as   Related   to   Output   and 

Health    of    Workers  —  Cotton    Manufacturing.        64   pages. 

March,     1918.    $1.00. 

Research  Report  No.  6.  The  Canadian  Industrial  Disputes  Investiga- 
tion Act.    28  pages.    April,  1918.    50  cents. 

Research  Report  No.  6.  Sickness  Insurance  or  Sickness  Prevention? 
24  pages.    May,  1918.    50  cents. 

Research  Report  No.  7.  Hours  of  Work  as  Related  to  Output  and 
Health  of  Workers  —  Boot  and  Shoe  Industry.    76  pages.    June, 

1918.  $1.00. 

Research  Report  No.  8.  Wartime  Employment  of  Women  in  the  Metal 
Trades.    80  pages.    July,  1918.    $1.00. 

Research  Report  No.  9.  Wartime  Changes  in  the  Cost  of  Living  —  July, 
1914,  TO  June,  1918.    82  pages.    August,  1918.    $1.00. 

Research  Report  No.  10.  Arbitration  and  Wage-Fixing  in  Australia. 
52  pages.    October,  1918.    $1.00. 

Research  Report  No.  1 1 .  The  Eight-Hour  Day  Defined.   12  pages.    Decem- 
ber, 1918.    50  cents. 

Research  Report  No.  12.  Hours  of  Work  as  related  to  Output  and 
Health  of  Workers  —  Wool  Manufacturing.  69  pages.  Decem- 
ber, 1918.    $1.00. 

Research  Report  No.  13.  Rest  Periods  for  Industrial  Workers.  55  pages. 
January,  1919.    $1.00. 

Research  Report  No.  14-  Wartime  Changes  in  the  Cost  of  Living  —  July, 
1914,  TO  November,  1918.    33  pages.    February,  1919.    $1.00. 

Research  Report  No.  15.  Problems  of  Industrlvl  Readjustment  in  thb 
United  States.    58  pages.    February,  1919.    $1.00. 

Research  Report  No.  16.  Hours  of  Work  as  Related  to  Output  and 
Health  of  Workers  —  Silk  Manufacturing.    54  pages.    March, 

1919.  $1.00. 

Research  Report  No.  17.  Wartime  Changes  in  the  Cost  of  Living  — 
July,  1914,  to  March,  1919.    31  pages.     May,  1919.    $1.00. 

Research  Report  No.  18.  Hours  of  Work  as  Related  to  Output  and 
Health  of  Workers — Metal  Industries.    July,  1919.    $1.00. 

INDUSTRIAL  NEWS  SURVEY 

Important  industrial  news  in  concise  form. 
Weekly.  32.00  per  year 


XTNIVERSITY  of  CALIFORNIA 

LOS  ANGb;LES 
LIBRARY 


National 
industrial 
conference    board. 
European   corrunlssioi-i 
Interim  report   of 
the   European   com- 
inlsslonr 


Thi!>   booh   is  DUE  on  the  last 
date  stamped  below 


'8    0 


10m-4.'28 


.  \ 


